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Sole trader, two businesses and vat

Its the person whose vat registered, isn't it?

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Am I correct in thinking that if a person has a business which is vat registered and he's a sole trader, if he's also in receipt of furnished holiday letting income in his own name, then that income is vatable too. Only asking as his current tax adviser says its not-have I missed something?

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By Accountant A
19th Jun 2019 11:23

If you aren't his current tax adviser, I wouldn't worry about it.

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By jcace
19th Jun 2019 11:37

HMRC sum up it up well:
"It’s the ‘person’, not the business, who is registered for VAT. A person can be an individual, a legal person or a legal entity. Each VAT registration covers all the business activities of the registered person.

A legal person is an entity or body which has an existence separate and distinct from the persons (legal or natural) comprising that entity or body."

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By fawltybasil2575
19th Jun 2019 13:34

@ Di (OP).

Jcace is spot on.

Since you refer to a "current tax adviser", and if perchance the sole trader at issue is contemplating transferring their allegiance to yourself, you should be aware of the methods to be adopted to avoid the (almost certain) disadvantage of the potential new client's holiday lettings business being the income of the same person; and the consequent probable means of avoiding this (basically changing the status of one of the two businesses).

It is not clear whether there are two businesses CURRENTLY in operation or whether the possibly potential new client is PROPOSING to acquire the holiday lettings business. Be that as it may, one must [in considering the "VAT-efficiency" of having two separate persons operating the two businesses (one perhaps being a partnership or limited company)] ALSO consider (i) the DIRECT TAX consequences, (ii) LEGAL considerations and (iii) PRACTICAL and OTHER FINANCIAL considerations.

In short, resolving the "VAT problem" is straightforward in itself, but one must give due consideration to whether the standard methods of alleviating that problem have other, and possibly more substantial/important, adverse consequences.


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